Tax-Exempt Bond Securitization (TEBS): Multifamily Variable Rate Securities
Brings capital market efficiencies to the affordable housing market
- Freddie Mac's Class A Multifamily Variable Rate Certificates are fully guaranteed tax-exempt or taxable securities supported by pools of unenhanced tax-exempt multifamily housing revenue bonds or related taxable bonds and mortgages.
- Owners can exchange unenhanced bonds for senior Class A Certificates that are sold to the public, and subordinate Class B Certificates which are retained by the bond owner and pledged to Freddie Mac.
- Forward TEBS is available to securitize pools of fixed-rate multifamily housing revenue bonds through the TEBS execution within a specified timeframe and within a pre-agreed fee and subordination structure.
How It Works
- Freddie Mac will guarantee the payment of scheduled principal on the bonds and all interest on the tax-exempt and taxable Class A Certificates.
- Monthly interest payments to the Class B Certificates will be made on a subordinate "if available" basis only. Additionally, if the Class A Certificates bear interest at a seven-day variable rate, they will be “puttable” upon five business days notice, and Freddie Mac will guarantee payment of the purchase price of any such “put” certificates, if the remarketing agent does not remarket those certificates within such time period.
- Freddie Mac can also issue a forward commitment, which offers locked-in pricing and subordination levels (sizing of the subordinate Class B Certificates).